Retailers Are Singing The No Consumer Blues
Thursday, February 07, 2008SUSIE GHARIB: Sobering news today from the nation's biggest retailers as consumers cut back on their spending. January sales at U.S. chain stores were among the weakest on record. Wal- Mart sales rose only 0.5 percent, analysts were expecting a gain of 2 percent. Suzanne Pratt reports on why consumers are growing more cautious.
SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: January was supposed to be the month of the gift card, a good time to cash them in and take advantage of post-holiday sales. But, a quick look at the January chain store numbers suggests consumers are cutting back sharply on their spending. UBS analyst Neil Currie says Americans are worried a recession is coming.
NEIL CURRIE, RETAIL ANALYST, UBS: Consumer confidence is low with the housing market being under pressure and unemployment numbers going up. People reading the headlines, they're feeling pinched.
PRATT: The world's largest retailer blamed its sales shortfall on nasty weather in the Midwest. But UBS' Currie, whose firm does business with Wal-Mart, also noted that its shoppers are using gift cards for necessities.
CURRIE: Auntie Mable may have given you a gift card to go and buy a sweater, but instead they're going to buy their cereals and whatever else it may be for daily purchases.
PRATT: Weak sales plagued everything from department stores like JC Penny to specialty retailers like Limited and Hot Topic. Warehouse stores, BJ's and Costco rang up some of the few positive surprises. And, it was a mixed bag for high-end retailers, with Saks beating expectations and Nordstrom falling far short. Luxury has held up reasonably well given the uncertain economy. But, Bear Stearns analyst Christine Augustine says demand for things like pricey handbags is slipping.
CHRISTINE AUGUSTINE, RETAIL ANALYST, BEAR STEARNS: Really I think it's mainly that consumer who is more aspirational, who kind of traded up, because they were able to take value out of their home and so they kind of were able to shop beyond their means, so that's where we're seeing a softening.
PRATT: Augustine says core luxury customers are still spending and that's what Gucci is counting on. Tomorrow, Gucci will open a glitzy new store on New York's Fifth Avenue, its largest in the world. CEO Mark Lee says if U.S. sales falter, other markets will pick up the slack.
MARK LEE, CEO & PRES., GUCCI: This long established balance between Europe, American, Asia typically is something that helps us when we face difficulties in one region or another.
PRATT: Analysts predict the weakness in chain store sales will continue in the coming months. Not only are consumers coping with an economic downturn, but Easter comes early this year, so early that people are less likely to spend for new spring clothes. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.
